Changes Coming to the Medicare Physician Fee Schedule in 2019 and Beyond

On November 1, 2018, the Centers for Medicare & Medicaid Services (“CMS”) released a final rule (and an interim final rule) on the Medicare Physician Fee Schedule (“PFS”).[ii] In addition to addressing payment policies and rates, the final rule includes quality service provisions aimed at realizing a Trump Administration strategy focused on increasing accessibility, quality, affordability, empowerment, and innovation. Within that broader strategy, many of the changes discussed in the final rule are aimed at reducing administrative burden and increasing payment accuracy.

Before diving into the details of the final rule, it is worth providing some relevant background and definitions. The PFS defines the payments to be made by Medicare for physicians—as the name suggests—but also for other practitioners such as nurse practitioners, physician assistants, and physical therapists. In addition to practitioners, the PFS defines payments made to facilities such as radiation therapy and independent diagnostic testing centers.

The PFS bases payments on what are called Relative Value Units (“RVUs”), which look at the relative resources that a provider typically uses to provide the services at issue. Such resources include practice expenses, malpractice costs, as well as the practitioner’s actual work. There is one more step between establishing RVUs and determining the payment amount. That step is called the conversion factor. Applying the conversion factor to the RVUs gets you the payment rate. In the Medicare payment formula (which we will mercifully avoid discussing in greater detail in this article), RVUs are adjusted by geography, but the conversion factor is a constant that, when multiplied by the geographically-adjusted RVUs, gets you a payment amount. The 2019 conversion factor is $36.04, up slightly from 2018’s 35.99 conversion factor.

With the groundwork laid, I will provide some examples of the numerous changes coming in the new year and beyond. Practitioners will no longer be required to justify a home visit versus an office visit by documenting the medical necessity of the former. Regarding medical records, practitioners are given more freedom to focus on changes in the patient’s status rather than starting from scratch so long as the records indicate that the practitioner did, in fact, review prior data. Similarly, practitioners need not re-enter information about a patient’s complaints and history that has already been entered by an ancillary staff member. Likewise, teaching physicians will no longer be required to include notations in medical records that were previously entered by a resident (or other member of the medical team).

Other changes in CMS’s final rule do not take effect until 2021. For example, the final rule creates a single rate for the three levels (levels 2, 3, and 4) of evaluation and management office/outpatient visit that sit between the shortest and simplest (level 1) and the longest and most complex (level 5). Practitioners conducting visits falling within those three levels will also be granted some flexibility with how such visits are documented and will have available to them a new “extended visit” add-on code to account for the additional resources necessary to conduct an extended patient visit. While the 2019 changes seem primarily aimed at trimming unnecessary administrative practices, the 2021 changes appear aimed in large part at providing practitioners with added flexibility.

In terms of modernizing the PFS, the final rule also includes the introduction of two newly-defined services focused on technology. The first new code is for brief communication technology-based services such as virtual check-in to determine whether an office visit is necessary. The second allows doctors to enter a payment code specifically for remotely evaluating videos or images provided by patients. CMS is also finalizing new codes related to remotely monitoring chronic care patients and interprofessional consultations via the internet.

For obvious reasons, telehealth is becoming an increasingly favored method of providing care in rural areas. In light of this, the final rule also includes payment for rural health clinics and federally-qualified health centers in connection with communication technology-based services and remote evaluations performed by a qualified practitioner without an associated billable visit. Addressing another concern that rural areas are facing, an interim final rule is aimed at expanding the use of telehealth services in connection with substance use disorders, including opioid abuse.

There are some changes to prescription drug reimbursement, as well. Medicare Part B drugs (not to be confused with the optional prescription drug benefit governed by Part D) are typically reimbursed to practitioners using a formula that determines the average sale price of a drug (i.e., the cost) and then adds a 6% margin. I use the word “typically” because sometimes Part B drugs are reimbursed at a usually higher amount called the wholesale acquisition cost. Starting in 2019, this discrepancy will be addressed by reducing the margin applied to drugs falling under the wholesale acquisition cost formula from 6% to 3% during the first quarter of sales when sales data is insufficient to use the average sale price formula. CMS’s goal with this change is to limit potentially excessive payments arising from the use of new drugs that have what CMS considers high launch prices.

Rest assured, the foregoing is merely a taste of the thousands of pages of changes coming in 2019 and beyond. While it will take time to peruse the many changes, it is important both for you and your medical practitioner clients (and, in particular, their billing departments) to become familiar with the changes or consult with someone who is.

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[i]Vasilios (“Bill”) J. Kalogredis, Esquire is Chairman of Lamb McErlane’s Health Law Department. Bill has been practicing health law for over 40 years, representing exclusively physicians, dentists, group practices, other health care professionals and health care-related entities.

Andrew Stein is an associate at Lamb McErlane PC. He concentrates his practice at the intersection of health law and business law. He represents individuals and businesses with a primary focus on licensed medical and dental professionals, medical and dental practices, and other health care entities.

[ii] The complete text of the final rule can be found at https://s3.amazonaws.com/public-inspection.federalregister.gov/2018-24170.pdf; a more manageable CMS factsheet for the final rule can be found at https://www.cms.gov/newsroom/fact-sheets/final-policy-payment-and-quality-provisions-changes-medicare-physician-fee-schedule-calendar-year